Pre-tax losses widened to £129.1m, from £15.6m in 2008, the Doncaster-based company said. Total production fell to 7m tonnes in 2009 from 7.9m tonnes in 2008, although it said new long-term supply contracts will boost output to 7.6m next year.

Analysts said UK Coal’s recent financial difficulties would have worried Hargreaves, who don’t want the merger to put their own business at risk. Speculation about a merger between the two began in March.

UK Coal also said it plans to sell up to a third of its agricultural estate to cut high debt levels, which currently stand at £181.9m.

“Over the next 12 to 15 months we could potentially sell up to a third of our agricultural land,” chief executive Jon Lloyd said.